Crown capped for another year, at least
15. 2. 2016 | Source: BusinessInfo.cz
The Czech National Bank [ČNB] has extended its weak crown policy. Czechs will not be able to buy a euro for less than 27 crowns at least until the beginning of 2017, with the latest central bank policy being to most probably remove the crown cap at some point in the first half of next year.
Prior to its latest policy meeting, the ČNB had not excluded ending its currency intervention regime before the conclusion of this year. The cause of the changed tactics is essentially lower price growth by the turn of 2015 than the central bankers were counting with. It is now anticipated that the Czech Republic can only reach its two-percent inflation target by the end of the first quarter of 2017, approximately three months later than what the ČNB predicted in its forecasting last November.
"It is possible to exclude the ending of the cap before the start of 2017," said ČNB governor Miroslav Singer.
With their statements, the central bankers have eased market anxieties over possible exchange rate policy changes in connection with this year's naming of a new ČNB governor.
"There is a sole possibility for the currency cap to still be taken away this year which would only stem from president Zeman taking the unexpected step of not naming Jiří Rusnok as governor. That however is very unlikely," said ING Czech Republic chief economist Jakub Seidler. Experts largely anticipate that the central bank will stop intervening against the appreciation of the crown during spring 2017.
Originally published in E15 weekly, economic and business newsmagazine. Author: Jaroslav Bukovský